Parent company USA Interactive was shrugging it off, but Wall Street took a dim view of a Hotels.com statement saying that fourth-quarter revenues won't meet estimates, and punished the stock by dropping its price 25 percent.

Hotels.com stock was down $15.05 in early afternoon trading, to $43.99. At one point the stock was off 31 percent.

The online room booking service cut expectations for fourth-quarter revenue to a range of $270 million to $271 million, versus previous projections of $283 million to $289 million. The company said adjusted net income is expected to come in at $22.2 million to $23 million, versus previous projections of $27 million to $28 million.

The economy and concerns about a possible war with Iraq got the blame as hotels everywhere slashed room rates in the face of a lodging slump.

Hotels.com, which books rooms at more than 4,500 hotels worldwide through several Web sites, said its results were hit by a drop in average daily rates that was "unusual, sudden and straight down," CEO David Litman was quoted as saying.

A number of factors affected fourth quarter revenue, the most significant of which was an unexpected falloff in average daily rates (ADRs) for bookings made after Oct. 23, which represented approximately $9 million in lost revenue, the Dallas-based company said.

Hotels.com parent company, Barry Diller's e-commerce conglomerate USA Interactive , quickly issued a statement saying that its anticipated financial performance for full year 2002 will be generally in line with expectations, despite the problems at Hotels.com.

Still, Wall Street was not happy and investors sent USA stock down more than 10 percent in afternoon trading, to $21.69. USA's travel operation Expedia.com was down about 8 percent, to $64.70.

The travel industry has been struggling to get back on track ever since the Sept. 11 attacks on the United States, and the sluggish/recessionary economy has reduced both corporate and leisure travel. And fear of war with Iraq is also keeping travelers at home, Jim Winchester, a lodging analyst at Lazard Freres, was quoted as saying.

Hotels.com offers great price transparency for consumers, who can keep checking for lower prices, then cancel and re-book, Bailey Dalton, an analyst at C.E. Unterberg, Towbin, told Reuters. "Their market is bargain shoppers," she said. "In a way, they're a victim of their own success."

Final results for the Hotels.com's fourth quarter and full year 2002 will be released in early February. The company took pains to say that its total revenue for 2002 grew by more than $400 million, the largest annual increase in its history. And it expects revenue to rise to $1.25 billion in 2003 from about $943 million last year.

The company also announced plans to repurchase up to $100 million of its Class A common shares. Rival Priceline.com, which has increasingly been focusing on its hotel booking engine as airline ticket sales have slumped, has not revised its guidance.